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Michael Riegel DipM BSc MSc MBAView Michael Riegel DipM BSc MSc MBA’s profile
Business Aviation Publisher, Market Analyst, Business Jet Designer & Consumer AdvocateVista Global Q3 2023 Earnings In Review
Vista Global (VG) financial statements aren’t widely published. However, I understand that Q3 2023 numbers are readily available. I wanted to share some insights and personal opinions.
During Q3 2023 VG revenues fell by 2.5% YoY. The company operates a dedicated fleet of 268 aircraft, down one aircraft YoY. VG’s managed fleet dropped from 93 to 75 aircraft, or 19%. I suspect this shrinkage results from charter customers moving into the VistaJet program, with flight hours migrating from managed to dedicated aircraft. VG’s reported growth in program hours may well reflect internal revenue transfer, rather than any surge in new business. Having reviewed VistaJet agreements, for my clients, users sign a three-year agreement that requires annual pre-payments. However, contracts can be terminated by paying a modest exit penalty, at the end of each year. VistaJet contracts lack the long-term capital and revenue guarantees enjoyed with NetJets shares. Further, NetJets assume very little debt or residual value risk, compared to VG.
Dedicated aircraft utilization rose from 813 to 834 annualized hours, far below the 1,250 target utilization quoted in VG’s 2023 $500 million bond prospectus. Deadhead increased from 30% to 31.7%, YoY, indicating declining fleet efficiency. VG aircraft appear to be averaging less than 570 revenue hours per annum, which isn’t nearly enough to allow their dedicated fleet of super midsize, large and ultra long-range jets to generate a profit, IMHO.
Let’s address free cash flow. Q3 2023 financial statements detail “diluted yield” of $10,500 per hour. I take this to mean VG's average net charter income per hour. VG also detail $4,200 in “variable DOCs per hour”. These numbers convert into hourly direct costs of 40% of hourly revenues. If my interpretation is correct, VG’s $949.4 million in deferred revenue, which represents pre-paid but un-flown hours, should cost roughly $380 million to fly. I see $276 million in available cash! Further, my go-to financial analyst estimates that VG consumed more than $80 million per month, between Q1 and the end of Q3 2023. I see frequent mentions of EBITDA, among quotes from VG leadership, a number that excludes major cash outflows that render this metric misleading, IMHO. I prefer simpler measures of financial performance, like free cash flow. Despite receiving $949.4 million in pre-paid revenues, $500 million from a 2023 bond issue, a $60 million draw-down against a $200 million revolving line of credit and $57.5 million from refinancing dedicated aircraft, VG seem to be consuming cash faster than it can be replaced. Once Q4 2023 results emerge, I'll post an update. Based upon these Q3 2023 numbers, I am struggling to find much that's positive in these results.
As always, I invite feedback from Vista Global, if I have made any significant errors in my interpretation of their financial statements. I will happily correct or retract any inaccuracies.